Real terms house price falls - what is "real"

chucknorris

geneer wrote: »

In the real world my friends and workmates told me "I have to hand it to you, you called it". Or at least some of them did.

Those who had derided my opinions just went a bit quite on the subject. A bit like all those bulls who retired to bull island in 2008.

Hey...the real worlds a bit like this forum after all. :rotfl:

I've got some bad news for you geneer, they are laughing at you behind your back. I'm amazed you can't see it:

geneer work colleague no.1: Hi number two, has geneer bought a house yet?

no. 2: (bursts out laughing, coffee all over his desk) Nope, lets wind him up again before we go home to our semi's (which they bought some time ago). "Hey geneer I have to hand it to you, you sure called this housing market right" (No, 1 has to run out to room to contain his laughter).

geneer walks out of the room fully contented smiling to himself

secretary (Jane) who of course fully understands the situation says " Look I know he's a bit weird but have a heart, the poor guys lost the plot"

No.1: Sorry Jane you are right, but what's so funny is that he just can't see it. Anyway how's your flat hunting going?

secretary (Jane): Great, we put an offer in on Monday and it's been accepted.

StevieJ

Graham_Devon wrote: »

I doubt it.

I did however advise my mate against buying a certain house under a certain scheme, and he has since talked about it and stated I was correct.

We didn't specifically meet up and sit round a table solely to discuss it though.

What was that a half share

geneer

chucknorris wrote: »

I've got some bad news for you geneer, they are laughing at you behind your back. I'm amazed you can't see it:

geneer work colleague no.1: Hi number two, has geneer bought a house yet?

no. 2: (bursts out laughing, coffee all over his desk) Nope, lets wind him up again before we go home to our semi's (which they bought some time ago). "Hey geneer I have to hand it to you, you sure called this housing market right" (No, 1 has to run out to room to contain his laughter).

geneer walks out of the room fully contented smiling to himself

secretary (Jane) who of course fully understands the situation says " Look I know he's a bit weird but have a heart, the poor guys lost the plot"

No.1: Sorry Jane you are right, but what's so funny is that he just can't see it. Anyway how's your flat hunting going?

secretary (Jane): Great, we put an offer in on Monday and it's been accepted.

:eek: Oh dear. Some one needs some quiet time I think.

Darthvader

chewmylegoff wrote: »

There is a lot of blurb, mostly coming from omnivorous furry animals with big teeth, about "real terms" declines in house prices, which are apparently a lot more important than nominal price variances.

When considering the price of a house, they say, you have to take into account inflation. Therefore if inflation is 5% and house prices increase by 3%, the price of the house has actually fallen, in real terms.

Is it correct to say that house prices are falling in real terms, by comparing house prices to RPI or CPI?

Or is that just a crock of old poo.

Say house prices increase from £100,000 to £110,000, and RPI is running at 20%. If my salary remains the same (£5 million for those of you who are wondering), then house prices have not fallen in "real" terms as far as I am concerned. Instead, they have got more expensive.

So, my point is that what is really relevant is not RPI or CPI, but the following (and mostly (i)):

(i) rate of wage inflation (net of taxation rate inflation).

(ii) the net interest rates on savings vs. rate of increase in house prices.

Further, if RPI is running at 5% and your wage is flat, then even if the price of a house remains stagnant in nominal terms, it is becoming more unaffordable and therefore arguable more expensive in "real terms", as the amount of wage you have to spend on the house is getting squeezed by the price of everything else.

At the moment, wages are not increasing by anything like the rate of inflation, so is it actually correct to claim that we are seeing "real terms" falls in house prices?

Or am I just being incredibly dim (again)?

Price is what you pay, value is what you get.

So real terms reffers to VALUE! Price refers to how many units of fiat currency something is measured in. So to measure price is easy, but means nothing really. To measure value is more tricky. Best way is measure how much stuff is worth the same as some other stuff through history and at present time.